BILL ANALYSIS Ó
SB 1340
Page 1
Date of Hearing: June 17, 2014
ASSEMBLY COMMITTEE ON HEALTH
Richard Pan, Chair
SB 1340 (Ed Hernandez) - As Amended: March 24, 2014
SENATE VOTE : 33-0
SUBJECT : Health care coverage: provider contracts.
SUMMARY : Expands provisions related to gag clauses in contracts
between health plans or insurers and providers. Specifically,
this bill :
1)Expands the prohibition on any provision that restricts the
ability of a health plan or insurer to furnish cost and
quality information to enrollees or insureds, which currently
applies to hospitals and certain facilities owned by
hospitals, to include any provider or supplier, and to allow
sharing with beneficiaries of a self-funded plan or other
persons entitled to access services through a network
established by the plan or insurer.
2)Clarifies that such gag clauses are prohibited on the cost of
a procedure or a full course of treatment, including facility,
professional, and diagnostic services, prescription drugs,
durable medical equipment, and other items and services
related to the treatment.
3)Increases from 20 to 30 days the amount of time a health plan
or insurer must give a provider or supplier to review data to
be shared by a health plan or insurer.
EXISTING LAW :
1)Prohibits contracts between health plans or insurers and
hospitals from containing any provision that restricts the
ability of the health plan or insurer to furnish information
to subscribers or enrollees of the plan concerning the cost
range of procedures at the hospital or facility or the quality
of services performed by the hospital or facility.
2)Requires health plans and insurers to provide the hospital at
least 20 days to review the methodology and data developed and
compiled by the health plan or insurer before cost or quality
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information is provided to subscribers or enrollees, as
specified.
3)Requires health plans and insurers, if the information
proposed to be furnished is data that the plan or insurer has
developed and compiled, to utilize appropriate risk adjustment
factors to account for different characteristics of the
population, such as case mix, severity of patient's condition,
comorbidities, outlier episodes, and other factors to account
for differences in the use of health care resources among
hospitals and facilities.
FISCAL EFFECT : None
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author of this bill,
health care costs continue to outpace inflation and more costs
are being shifted to consumers. According to the California
Employer Health Benefits Survey, nearly one-third of covered
workers in small firms had a deductible of $1,000 or more in
2013. A silver plan purchased through Covered California (a
mid-level product with the greatest enrollment of the plan
tiers in Covered California) has a deductible of $2,000 and
out-of-pocket maximum of $6,350. The author argues that
consumers often face disparities in prices charged by
different providers for the same service and need to
understand their financial liability and find the best quality
and value. Despite this, consumers often do not have the
tools to make informed decisions because some providers have
prevented price and quality information from being disclosed.
The author writes that recent legislation has made attempts to
bring transparency to contracts between hospitals and health
plans and insurers; however, there has been some difficulty in
implementation due to a lack of clarity in the law. This bill
improves transparency by making a number of clarifying changes
to the prohibition on gag clauses in hospital contracts. It
also builds on existing law by allowing enrollees in
self-funded health plans to obtain cost and quality
information.
SB 751 (Gaines and Ed Hernandez), Chapter 244, Statutes of 2011,
prohibits clauses in a contract between a health plan and
hospital that bar the plan from sharing cost and quality
information regarding the hospital with that plan's members,
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with a process for hospitals to review the information for
accuracy. According to the author, virtually all large health
plans now provide hospital cost and quality information to
their members. However, several problems with the current
transparency requirements have emerged:
a) SB 751 only applies to a health plan's own members, not
to members of a self-funded plan administered by the health
plan. As a result, members of self-funded plans do not
have access to the same cost and quality information that
health plan members do.
b) SB 751 applies only to hospitals, excluding other types
of providers. As a result, plans are unable to share cost
and quality information regarding some providers and it is
unclear whether SB 751 protects their ability to provide to
consumers the complete costs for a given procedure,
including both facility and provider costs.
c) SB 751 did not set a maximum on the period of time plans
are required to allow for provider review of data before it
is disclosed to consumers. As a result, some providers
have insisted on significantly longer than 20 days, and
this makes it more difficult for plans to make timely
information available to consumers.
2)BACKGROUND . With increasing emphasis on controlling the
growth of health care costs and trends shifting more of the
cost of health care to health insurance members, many are
turning to quality, and in particular price, transparency
efforts to inform individual decision-making and rein in
spending. A 2011 article published in the New England Journal
of Medicine on price transparency refers to the wide variation
in medical prices within the United States. According to the
article, publishing price information could narrow the range
and lower the level of prices, by permitting consumers to
engage cost-conscience shopping and stimulate price
competition on the supply side, forcing high-priced providers
to lower their prices to remain competitive. The article
authors add that patients are also concerned about quality but
that comparative quality information is not always available,
so price is used as a proxy. According to the authors of this
article, successful price-transparency initiatives should
provide episode level costs (including all related doctor's
visits, tests, facility charges, etc.), meaningful information
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about quality must also be provided, and most fundamentally,
consumers must be engaged in considering price information in
their decisions to use medical care.
3)SUPPORT . SEIU California, in support, writes that its members
are impacted and actively involved in shaping policy as it
relates to health care transparency: as purchasers of health
care, in health benefits bargaining for represented workers,
as California Public Employees' Retirement System (CalPERS)
members, as Medi-Cal beneficiaries, as state and county
workers administering public health coverage programs, as part
of the health care delivery system workforce, and as advocates
for patients. The California Labor Federation, in support,
argue that consumers need cost and quality data to make
informed decisions about their health care, and large
purchases need similar data to negotiate with health plans and
to design benefits that give their members the greatest health
care value. The California Professional Firefighters, in
support, writes that measuring and publicly reporting
information about the performance of physicians, hospitals,
and other health care providers is critical to improving
health care quality and controlling costs.
CALPIRG, also in support, argues that consumers increasingly
have insurance plans with deductible and coinsurance that
encourage them to shop around; this bill will help provide
consumers with meaningful information to inform their
shopping.
The California Association of Health Plans, in support, states
that this bill will provide pricing transparency without
significantly increasing any administrative burden on health
plans.
4)CONCERNS AND COMMENTS . The California Association of
Physician Groups (CAPG) writes to express a few significant
concerns and comments. CAPG asserts that thousands of Covered
California enrollees selected plans during open enrollment
without access to correct provider directories, and argues
that, before plans are allowed to publish provider quality
data, the accuracy of their own provider directories should be
established. CAPG also argues that this bill, like SB 751,
leaves enforcement of the validity of cost and quality
information to individual providers, which is not practically
workable, especially for individual and small practice
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physicians. CAPG also suggests that existing regulatory
agencies or an independent, nonprofit third party should be
required to verify the accuracy of information shared by
plans.
5)RELATED LEGISLATION .
a) AB 1558 (Roger Hernández) creates the California Health
Data Organization within the University of California to
organize data provided by health plans and insurers on a
website to allow consumers to compare the prices paid for
procedures, as specified. AB 1558 is set for hearing in
the Senate Health Committee on June 25, 2014.
b) SB 746 (Leno) of 2013 would have established new data
reporting requirements on all health plans applicable to
products sold in the large group market and established new
specific data reporting requirements related to annual
medical trend factors by service category, as well as
claims data or de-identified patient-level data, as
specified, for a health plan that exclusively contracts
with no more than two medical groups in the state to
provide or arrange for professional medical services for
the enrollees of the plan (referring to Kaiser Permanente).
SB 746 was vetoed by the Governor, who urged all parties
to work together in the effort to make health care costs
more transparent.
c) SB 1182 (Leno) requires health plans and insurers to
submit to regulators for rate review any large group plan
contract or policy rate increases that exceed 5% of the
prior year's rate and establishes new data reporting
requirements for products sold in the large group market.
SB 1182 is set for hearing on June 24, 2014 in this
Committee.
d) SB 1322 (Ed Hernandez) requires the Governor to convene
the California Health Care Quality Improvement and Cost
Containment Commission to research and recommend
appropriate and timely strategies for promoting
high-quality care and containing health care costs.
Requires the commission to issue a report to the
Legislature and the Governor making recommendations for
health care quality improvement and cost containment. SB
1322 is set for hearing on June 24, 2014 in this Committee
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6)PREVIOUS LEGISLATION .
a) SB 1196 (Ed Hernandez), Chapter 869, Statutes of 2012,
prohibits a contract in existence or issued, amended, or
renewed on or after January 1, 2013, between a health plans
or insurers, and a provider or supplier, from prohibiting,
conditioning, or in any way restricting the disclosure of
claims data related to health care services provided to an
enrollee or subscriber of the health plan or carrier, or
beneficiaries of any self-funded health coverage
arrangement administered by the carrier to a qualified
entity, as defined.
b) SB 751 prohibits contracts between health plans and
insurers and a licensed hospital or health care facility,
owned by a licensed hospital, from containing any provision
that restricts the ability of the carrier from furnishing
information to subscribers, enrollees, policyholders, or
insureds concerning cost range of procedures or the quality
of services.
c) AB 2389 (Gaines) of 2009 would have prohibited a
contract between a health facility and a carrier from
containing a provision that restricts the ability of the
carrier to furnish information on the cost of procedures or
health care quality information to carrier enrollees. AB
2389 died in the Assembly on Concurrence.
d) SB 1300 (Corbett) of 2008 would have prohibited a
contract between a health care provider and a health plan
from containing a provision that restricts the ability of
the health plan to furnish information on the cost of
procedures or health care quality information to plan
enrollees. SB 1300 died on the Senate Floor.
e) AB 2967 (Lieber) of 2007, would have established a
Health Care Cost and Quality Transparency Committee to
develop and recommend to the Secretary of the Health and
Human Services Agency a health care cost and quality
transparency plan, and would have made the Secretary
responsible for the timely implementation of the
transparency plan. AB 2967 died in the Senate
Appropriations Committee on the inactive file.
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f) AB 1296 (Torrico), Chapter 698, Statutes of 2007,
requires a health plan or contractor offering health
benefits to CalPERS members and annuitants to disclose to
CalPERS the cost, utilization, actual claim payments, and
contract allowance amounts for health care services
rendered by participating hospitals to each member and
annuitant. Requires this information to be deemed
confidential information.
REGISTERED SUPPORT / OPPOSITION :
Support
Blue Shield of California
California Chiropractic Association
California Labor Federation
California Professional Firefighters
California School Employees Association
CALPIRG
Health Access California
Local Health Plans of California
Pacific Business Group on Health
San Diego Electrical Health and Welfare Trust
SEIU California
Silicon Valley Employers Forum
UNITE HERE!
Opposition
None on file.
Analysis Prepared by : Ben Russell / HEALTH / (916) 319-2097